While starting a franchise comes with its own risks and expenses, starting one's own business can be even more costly. For this reason, some people may choose to purchase a franchise from a larger company. In return, they get help choosing and acquiring locations for the business and assistance in making sure that the business is run successfully. However, the relationship between the franchisor and the franchisee, like all relationships, has the potential to turn sour. If that happens, one or both sides will want a competent business attorney to help bring the dispute to a satisfactory resolution.
Generally speaking, there are two main reasons that franchise litigation would occur. The first reason is that one party believes that the other is not doing what they agreed to do under the franchise agreement. This might happen if the franchisee fails to pay fees or royalties to the franchisor, or by violating other aspects of the agreement, such as the territorial provision or the non-compete provision.
Alternatively, the franchisor may be the one to violate the contract by failing to support the franchisee in any aspect involved in setting up the business. This sometimes happens when the franchisee alleges that they received a verbal promise from the franchisor during the investigation of the opportunity for the franchise. If this promise is not fulfilled, the franchisee may feel that they were cheated or lied to. For this reason, it is a good idea for the franchisee to insist that any promise made is given in writing. That way, they can hold the franchisor responsible if it later fails to come through on that promise.
The other main reason that franchise litigation might arise is if one party is unpleasantly surprised by the conduct of another party. For example, a franchisor opening another store too close to the franchisee might be perceived as a threat to the franchisee. If the franchisee fears that this new location will have a negative effect on its own business, it might file a lawsuit against the franchisor.
Likewise, the franchisor might take issue with some of the ways in which the franchisee chooses to run the business. While franchisees are, to an extent, a small business, and they are granted a certain amount of autonomy in the way that they choose to run that business, ultimately, it is the franchisor's name which is at stake. As a result, everything that happens in the store or restaurant reflects on the franchisor. Therefore, if it believes that the franchisee is doing something which might ultimately harm the brand, then the franchisor might choose to file a lawsuit against the franchisee.
While litigation is never a pleasant or inexpensive endeavor, two parties that cannot come to an agreement on their own might have little choice but to resort to litigation. If that happens, the parties will want to be armed with competent business attorneys with experience in franchise litigation. Before the dispute reaches the point of litigation, a good business attorney can also aid in mediation between the parties, helping them to reach an agreement without going to court.
The attorneys at DiTommaso ♦ Lubin are skilled in franchise litigation. We are capable of balancing legitimate business interests and creating a tactical litigation plan. With offices conveniently located in Oakbrook Terrace and Chicago, Illinois, we have represented clients all over the country. To consult with one of our knowledgeable attorneys today, you can contact us online or give us a call at 877-990-4990.